Evolution Shift
A Future Look at Today
May 18th, 2007

The Good News about High Gasoline Prices

It was reported yesterday that Americans are driving less, in large part due to the high price of gasoline. For the first time since 1981 the average American motorist is driving less. After 25 years of steady increases, the growth in total miles driven has leveled off in the last 18 months. This is in spite of the fact that there have been an additional 1 million drivers on the highways since 2005. While the population and workforce of the country has expanded by more than 1 percent, the total amount of driving has increased only 0.3 percent.

The interesting correlation between today and 1981 is that it was in that year that the price of gasoline reached its highest price when adjusted for inflation. The price reached an inflation adjusted price of $3.22 in 2007 dollars. That compares to the $3.11 national average price of yesterday. As regular readers of this column know, in January, I predicted record gasoline prices this year, so today’s high prices are no surprise. There is no doubt in my mind that between now and Labor Day, we will see prices continue to go up, mostly likely exceeding a $3.50 per gallon national average.

There are other reasons that Americans are driving less. The Federal Highway Administration says that 7 in 10 Americans now say they are combining trips and taking other steps to cut down on driving. In 2006 more people took public transportation than at any time in the last 49 years. Demographic data shows that many people are driving less due to the population growth in the downtowns of American cities. Though not reported, I suggest to you that the fact that we have recently crossed the 50% penetration of U.S. households that have high speed Internet access is also a factor. High speed connections allow people to telecommute more, to make more on-line purchases and to use on-line map services to find the most direct driving routes to desired destinations.

This is all good news. If it takes high prices for us to conserve, then so be it. Much more importantly, consistently high gasoline prices allow innovation and development of alternative fuel sources. Initially, new types of ways to power vehicles will be expensive, and therefore high gasoline prices allow these new alternative ways to power transportation to be competitive. After the high gasoline prices of1981, the price collapsed to lows that lasted until this century.

It is no coincidence that higher priced alternative energy sources were not developed as they had no ability to compete economically.It could be easily argued that a Federal gasoline tax of $.50 -1.00 per gallon would be a very good thing, if managed properly. It would increase conservation and the revenues could go toward the development of alternative fuels and vehicles that run on them. Alternatively, the revenues could go into the Social Security system, so that every gallon of gasoline we buy helps to fund the long term financial security of our citizens. This tax would generate tens of millions of dollars a day. It would also provide further economic incentives to purchase cars that have high MPG ratings, which would further conserve energy and of course would help to lower CO2 emissions. Now that is a tax that makes sense.

To adapt a phrase about another addiction: thank you for not driving.

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